There is no doubt that the intensification of development in the GTA has created a significant and growing price gap between lowrise and highrise homes.

There is no doubt that the intensification of development in the GTA has created a significant and growing price gap between lowrise and highrise homes.

To fully understand what’s been happening to the GTA market, it’s essential to note the behaviour of both its segments: lowrise (detached, semi-detached and townhomes) and highrise (apartments, lofts and stacked townhomes).

The provincial government’s push for intensification in this region has meant the average price of the home types we’re making less of (lowrise) is rising, and the price of the home types we’re making more of (highrise) is flattening. This trend is occurring not only in the new-home market, but also in the resale market.

When people think about the government policies that impact the housing market, they tend to focus on interest rates and mortgage rules. But monetary policy is only part of the framework that our housing market is responding to. The other is the land use policies that have been put in place by the provincial and municipal governments across the GTA.

On the supply side, the GTA housing market has more than two million private dwellings that physically exist at the moment and could be part of the resale market. There are also 28,522 new homes currently available in builder sales centres across the region (74 per cent of them highrise, 26 per cent lowrise).

On the demand side, 5.5 million people live in the GTA, which saw its population grow by 19 per cent over the last decade.

Every home that exists today was at one point a new home. Consumers can only buy what the industry creates, and the industry can only create what the government allows.

Since the province introduced its intensification policies eight years ago, the balance in the types of homes being built across the region has fundamentally shifted. A policy framework that calls for the region to grow up — not out — has meant more highrise homes and fewer lowrise homes.

And the impact on prices has been profound.

In the GTA resale market, the price difference between a lowrise home and a highrise home was approximately $200,000 at the end of 2012. That price difference has basically doubled over the past nine years.

In the new-home market, the price difference between a lowrise home and a highrise home was $197,000 at the end of 2012, and that represents a nearly 300 per cent increase from 2004.

While the price of highrise homes flattened in 2012, the price of the limited supply of lowrise homes increased by 16 per cent.

If you type “definition of intensification” into Google, the first result says it’s an “action that makes something stronger or more extreme.” Judging by what’s been happening to GTA lowrise home prices in recent years, that’s certainly proving to be the case.

George Carras is the president of RealNet Canada Inc. His column appears in New in Homes & Condos the last Saturday of every month. For more information, visit realnet.ca or follow on Twitter at @realnet_canada.

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